Company Update - Housing & Urban Development - ICICI Securities

Housing and Urban Development Corporation (Hudco), a Miniratna company, plays a key role in various government schemes to develop Indian housing & urban infrastructure. Hudco reported a weak set of Q1FY21 numbers wherein muted topline and surge in provisioning dented PAT growth. Moratorium increased from ~25% in Q4FY20 to ~37-38% as of June 2020. Advances growth was muted at 3% YoY to Rs. 78179 crore due to slower economic activity. Housing loan growth was healthy at 7.6% YoY to Rs. 45868 crore while urban infrastructure book de-grew 2.2% YoY to Rs. 32009 crore. In terms of loan composition, government agencies accounted for ~96.3% of advances while loans to private companies accounted for 3.64% of total loan book. Disbursements for the quarter was at Rs. 2285 crore with a substantial portion of disbursements skewed towards low yielding social housing segment at Rs. 2200 crore (~96.3% of total disbursements).

Valuation & Outlook

The government's focus on housing and shortage of dwelling provides an opportunity for balance sheet. However, muted construction activity amid pandemic is seen keeping near term credit offtake benign. Decline in cost of funds & revival in urban infrastructure activities is seen leading to uptick in margin (that remained under pressure due to incremental lending to low yield social housing projects). Higher PCR at ~87% provides comfort but given impact on state government revenue, volatility in asset quality cannot be ruled out. Therefore, we expect credit cost to remain higher in FY21E. Dividend yield of 8% or higher is attractive but sustainability of payment is to be seen ahead. Though exposure to state government entities provides comfort, anticipation of near term volatility in provisioning and, thereby, earnings makes us adopt a cautious stance. Therefore, we maintain HOLD rating with a target price of Rs. 38, valuing the stock at 0.5x FY22E EPS.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_Hudco_CoUpdate_Sep20.pdf

Shares of Housing and Urban Development Corporation Ltd was last trading in BSE at Rs.32.85 as compared to the previous close of Rs. 34.2. The total number of shares traded during the day was 167768 in over 1416 trades.

The stock hit an intraday high of Rs. 34.8 and intraday low of 32.55. The net turnover during the day was Rs. 5597015.

Source : Equity Bulls

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